Can a Company Sues an Ex-Director for Starting a Competing Business in Nigeria?

Yes. A company can sue a former director who uses corporate trade secrets, client databases, or commercial opportunities diverted from the company to launch a competing enterprise.

Under the Companies and Allied Matters Act (CAMA) 2020, directors owe strict fiduciary duties of loyalty, good faith, and confidentiality to the company, which survive even after resignation in certain respects.

Section 306 of CAMA 2020 explicitly forbids directors from diverting corporate opportunities to themselves or exploiting confidential operational information acquired during their directorship.

Step-by-Step Procedure to Resolve This Legal Matter:

1. Preserve Contemporaneous Evidence: Collate physical receipts, verified bank timestamps, stamped letters, and electronic communication logs prior to formal intervention.
2. Deliver Statutory Pre-Action Notice: Issue a formal written demand outlining the specific statutory breach and giving the opposing party statutory time to remedy the grievance.
3. Engage Accredited Legal Counsel: Initiate judicial proceedings before the competent court of record or submit an official petition to the relevant regulatory commission.

A director who secretly prepares to launch a rival business while still occupying a board seat breaches their fundamental fiduciary duty not to place themselves in a position where personal interest conflicts with duty.

Key Evidential Considerations & Statutory Benchmarks:

• Documented statutory breach and verified timeline of events.
• Jurisdictional competence of the regulatory agency or superior court.
• Contemporaneous written correspondences, notices, and financial records.
• Quantifiable proof of pecuniary loss or civil rights violation.

“The rule of law ensures that statutory rights and duties cannot be compromised by informal arrangements or administrative fiat; every citizen has the constitutional right to due process.”
— Nigerian Legal Precedent & Constitutional Jurisprudence

Even after formal resignation, an ex-director who solicits company clients using proprietary client lists or poached company employees can be restrained by court injunction and made to account for profits.

The affected company can apply to the Federal High Court for an interim injunction stopping the ex-director from operating the competing enterprise or soliciting existing company clientele.

The company can also demand an account of profits, forcing the former director to surrender all revenues generated through the improper exploitation of company assets and opportunities.

However, in the absence of a valid non-compete clause or misuse of proprietary trade secrets, an ex-director is generally free to use their general professional skills and experience in the marketplace.

Companies must protect their interests by embedding well-drafted restrictive covenants and intellectual property protection clauses into director service agreements from the date of appointment.

Litigation against departing executives requires concrete documentary evidence, such as forensic email trails, misappropriated client files, or proof of pre-resignation diversion of contracts.

Courts in Nigeria balance the protection of legitimate corporate investments against the public policy interest in promoting fair commercial competition and freedom of trade.

A director’s office carries solemn legal responsibilities. Stealing company opportunities under the cover of entrepreneurship is a civil wrong that Nigerian courts will not hesitate to penalize heavily.

In Nigeria, the law exists to protect every citizen from exploitation and injustice, regardless of financial status or social standing. The courts are open to all, and regulatory agencies stand ready to enforce your rights.

Do not allow ignorance of the law to work against you. A brief consultation with a qualified Nigerian legal practitioner can clarify your rights and the remedies available in your specific situation.

For direct regulatory verification, official complaints, or accessing statutory registers without third-party fees, members of the public can consult the official portal of the Corporate Affairs Commission (CAC) Companies Registry.

Taking proactive legal action at the earliest sign of a rights violation is always better than waiting until the damage becomes irreversible. Nigerian courts have consistently protected citizens who assert their rights promptly and lawfully.

Ignorance of the law is no excuse.